Robinhood brings its stock-trading platform to the U.Ok., its first worldwide market

We knew it was coming, however stock-trading platform Robinhood is lastly open for enterprise within the U.Ok. — its first worldwide market since debuting in the U.S. more than a decade ago.

Robinhood is granting early entry to the app beginning immediately for individuals who be a part of the waitlist, with issues progressively opening as much as everybody throughout the U.Ok. a while in early 2024.

The Menlo Park, California-based firm started its U.Ok. launch prep nearly five years ago beginning with an area hiring spree, ultimately launching a waitlist for users in late 2019 earlier than abruptly pulling the plug in mid-2020. The corporate by no means actually gave a full rationalization for the choice, merely noting that “a lot has changed these past few months” and that it needed to concentrate on its U.S. enterprise.

In reality, the corporate was dealing with mounting stress at residence, together with allegations that it was deceptive prospects and using cynical gamification strategies to entice inexperienced customers to make dangerous trades. The corporate has also been hit with a number of multimillion-dollar fines over system outages and different misdemeanours.

And tragically, 20-year-old scholar Alex Kearns died by suicide after seemingly misinterpreting a negative balance of $730,000 in his Robinhood account, with the corporate ultimately settling a private lawsuit brought by his family.

Regardless of all this, Robinhood grew to become a publicly-traded entity in mid-2021. The corporate now claims 23 million customers domestically, although a lot of this progress was spurred by early-lockdown boredom as individuals hunkered down at residence, rising from 11.7 million month-to-month customers in December 2020 to greater than 21 million six months later. Bear in mind meme stocks? Yup, Robinhood was a significant protagonist in that entire affair.

So what does this all imply for Robinhood now, because it takes a second shot at worldwide growth?

“We’ve certainly learned from our previous launch attempt, and as a business we’ve grown and matured to a level where we’re 23 million customers, $87 billion in assets, and a listed business,” Robin Sinclair, Robinhood’s U.Ok. president, defined to TechCrunch. “We’ve also built technology that allows us to scale internationally.”

Robinhood app Picture Credit: Robinhood

Nonetheless, a lot has modified elsewhere since Robinhood’s final launch try. Quite a lot of native gamers have gained steam for starters, notably Richard Branson-backed Lightyear which started out by permitting U.Ok. customers to commerce U.S. shares earlier than increasing to support European users and stocks. And then there is Freetrade, the place Sinclair beforehand served as European managing director earlier than becoming a member of Robinhood this summer time. Freetrade helps U.Ok.-based merchants investing in U.S. and European shares, and it’s gearing as much as broaden into Europe shortly.

It’s these youthful upstarts that Robinhood will most definitely be up towards at first, moderately than dusty previous legacy monetary companies corporations reminiscent of Hargreaves Lansdown.

“Robinhood’s appeal in the U.S. was to a younger tech-savvy audience looking to access the shares market,” David Brear, CEO at fintech consultancy 11FS and co-host of the Fintech Insider Podcast, advised TechCrunch. “It’s likely they’ll appeal to a similar audience in the U.K. who have previously found the price and access barrier to the stock market too high. I can see them going head-to-head with Freetrade in terms of target market to start, and then moving on to target a more investment savvy audience such as Hargreaves Lansdown users, with bigger investment wallets.”

Robinhood, for its half, has been making noises about entering the U.K. for much of this year. At its Q3 earnings this month, the corporate confirmed it will launch brokerage operations within the U.Ok. imminently, with crypto buying and selling to comply with for European Union (EU) markets. The primary of those pledges has now come to fruition, with U.Ok. customers capable of commerce 1000’s of U.S. shares, together with these of all the most important corporations reminiscent of Apple, Amazon, Microsoft, and Meta.

Customers can place trades throughout commonplace market hours, which is 9.30am Japanese Time (ET) till 4pm, which interprets into 2.30pm-9pm UK time. Outdoors these hours, Robinhood’s 24 Hour Market allows customers to put so-called limit orders on 150 totally different shares 24 hours a day 5 days every week, operating from 1am (UK time) on Monday by way of 1am on Saturday.

Moreover, the corporate also supports American Depository Receipts (ADRs), which permits prospects to put money into some overseas corporations that don’t commerce on U.S. inventory exchanges.

Classes discovered

Regardless of the minor neobroker increase since Robinhood’s aborted launch three years in the past, Sinclair believes his firm is in a powerful place to capitalize on what continues to be a comparatively nascent market, and may lean on the expertise it has amassed from the U.S. over the previous decade.

“I’d say the U.K. is a great opportunity, the market actually really hasn’t been disrupted yet,” Sinclair stated. “It still looks and feels the same way it did, with traditional brokers dominating with high fees — and that hasn’t changed. So I’d say the opportunity still exists. We have the benefit of a 10-year-old platform in the U.S. that has developed and matured — we’ve added a lot of products and features, we’ve learned from 23 million customers.”

Whereas the corporate has confronted scrutiny over the way it targets inexperienced merchants within the U.S., Robinhood is taking these classes into its U.Ok. foray with in-app guides, suggestions, tutorials, knowledge, and market information, designed to arm fledgling merchants with the instruments to take a position properly — or, at the very least, not blow their complete financial savings — with out having to context-switch between a number of info sources.

“This is all about putting it in one place for a customer, so they can facilitate all of that research and all that information before they make trades and to guide their investment strategy going forward,” Sinclair stated.

Robinhood schooling: Picture Credit: Robinhood

What’s clear from all that is that Robinhood is making an attempt to start out on the right-footing after missteps in its home-market — for example, the corporate is introducing 24/7 chat, e-mail, and telephone assist within the U.Ok. from the get go. However regardless of these latest efforts to enhance its picture domestically, the corporate may nonetheless be struggling to get better from latest controversies, in response to Brear.

“Robinhood saw tremendous growth in the U.S. during the peak of Covid when everyone was spending a lot more time indoors and online,” Brear stated. “They benefited from a wave in hype around the product and the brand which then suffered significantly after the suicide of a 20-year-old customer, and it hasn’t quite recovered since. Much has been written about Robinhood’s responsibility to educate their customers about their product and safely engaging their money in the stock market, and even though they’ve invested in more customer education in the product and through content, their reputation probably hasn’t quite recovered since.”

Two years after going public, although, the obvious approach for Robinhood to develop is thru coming into new markets, and as one of many world’s main monetary facilities, the U.Ok. makes an excessive amount of sense for its first transfer.

“The U.K. is a super appealing market for fintechs for a bunch of reasons — a strong and collaborative regulator, a significant affluent fintech-engaged population, lots of talent, and a whole landscape of other fintechs and banks available as potential partners or suppliers,” Brear stated.

Present me the cash

Robinhood guarantees commission-free trades and no overseas change (FOREX) charges, whereas there aren’t any account minimums both (i.e. customers don’t should deposit x quantity to make use of the service). This all sounds nice, nevertheless it begs one easy query: how will Robinhood generate profits?

Within the U.S., the Securities and Change Fee (SEC) criticised Robinhood for deceptive prospects over the way it makes cash. Certainly, whereas Robinhood is commission-free, it primarily accepts the client’s commerce and sells it on to bigger buying and selling corporations which executes the commerce on behalf of the client — this can be a course of often called “payment for order flow” (PFOF). Thus, critics argue, Robinhood prospects obtain inferior costs for his or her trades, making the “free-trading” mantra little greater than a advertising phantasm — the investor themselves primarily grow to be the product.

All of this, although, is moot for Robinhood’s entry to the U.Ok. Certainly, PFOF has successfully been banned there since 2012, whereas the European Union (EU) is also introducing a ban on the practice which is about to come back in by 2026. Elsewhere, Canada has additionally banned PFOF, as has Singapore, whereas Australia is moving in that direction.

The SEC had beforehand indicated that it’d think about a PFOF ban, although it has retreated from that stance for now. However it’s clear that the worldwide regulatory panorama is more and more taking a dim view of PFOF, main Robinhood to pursue totally different income streams.

Final yr, Robinhood launched a new program that enables customers to “lend” out their shares to different customers, with Robinhood taking a lower of the spoils, whereas it additionally launched a new retirement product. Lengthy earlier than all that, the corporate rolled out a subscription-based Robinhood Gold product with premium options, whereas it had additionally been moving further into crypto territory, although it not too long ago restricted some of the crypto it supports as a result of regulatory scrutiny within the U.S.

It’s price noting that these strikes are additionally designed to appease Wall Road. Since going public more than two years ago, the corporate’s market cap has fallen from a near-$60 billion peak in 2021 to slightly over $7 billion immediately. Buying and selling quantity is also down overall on the Robinhood platform, whereas information emerged this month that Google’s guardian Alphabet had ditched its remaining stake in the company, having initially invested when it was nonetheless a personal startup.

All this factors to an organization that has not been faring significantly effectively, making income diversification and its impending U.Ok. launch all of the extra very important to its future. Whereas there isn’t any apparent moneymaking mannequin in place for Robinhood’s U.Ok. launch, Sinclair stated that it plans to “add products over time,” which could embrace introducing present merchandise reminiscent of Robinhood Retirement and Robinhood Gold to the market.

“We’re gonna build a diversified revenue stream, there’s products on our roadmap that we’ll deliver, and local products is an important component for us,” Sinclair stated. “What we’ve delivered in the U.S. really shows how diversified we can be.”

What can also be notable right here is that whereas Robinhood is just bringing its stock-trading product to the U.Ok., the corporate is about to launch crypto buying and selling within the European Union (EU). That is due to new EU rules coming into drive subsequent yr centered on so-called “stablecoins” which might be pegged to official currencies, bringing a clearer authorized framework for crypto corporations to work inside.

No such laws but exists within the U.Ok., although there are signs it’d fall into step with the EU sooner or later.

“For the U.K., we’re focused on launching brokerage, that’s our priority and we’re gonna get that right and then look to expand internationally with our brokerage business over time,” Sinclair stated. “Our crypto business will be in the EU, and in time we’ll consider it in the U.K. — but for now, our focus is on brokerage.”

On an identical observe, Robinhood’s U.Ok. launch is notable insofar because it the platform solely helps U.S.-listed shares — this does truly make sense for essentially the most half, as it’ll attraction to a brand new era of retail merchants, ones well-versed within the fortunes of Apple, Amazon, Meta, Tesla, Spotify, et al.

Nonetheless, Sinclair says it’ll look to open issues as much as further shares sooner or later.

“It’s absolutely on our plan — U.K. equities is something we hear from customers, that’s important to them,” Sinclair stated. “We’re starting with U.S. stocks, as it leverages our platform and our technology in the U.S. But absolutely — U.K. is on our roadmap.”